The All Share Price Index gained 28.
71 points or 1.13 percent to close at 2,562.25 while the more liquid Milanka went up 41.
08 points or 1.29 percent to 3,213.95 with turnover being 502 million rupees.
SLT closed up two rupees at 37 rupees with 3.
2 million shares traded mainly by retail and high net-worth investors, said Prashan Fernando of DFCC Stockbrokers.
The investors are speculating a court decision on March 10 would go in favour of the government and send the stock price higher.
Japan's NTT, which holds a 35.2 percent stake in SLT, is negotiating to sell a 25.
3 percent stake of the telco to the Usaha Tegas group of Malaysia controlled by billionaire Ananda Krishnan.
NTT has a contract to manage SLT which expires as soon as its stake falls below 10 percent.
The government, which owns 49.5 percent of Sri Lanka Telecom, has appointed a committee to work out a new management agreement with the Malaysian group.
Sri Lanka Telecom trading was the highest contributor to the day's turnover, adding 118 million rupees.
Brokers said a lot of trading was also seen in John Keells Holdings with 920,000 shares changing hands, believed to be a foreign crossing at 120 rupees.
There was also a lot of retail activity in Touchwood Investment which closed at 108.
25 rupees, up 12.50 rupees or 13 percent, with 591,700 shares changing hands during the day.
.